I've been covering the business of news, information and entertainment in one form or another for more than 10 years. In February 2014, I moved to San Francisco to cover the tech beat. My primary focus is social media and digital media, but I'm interested in other aspects, including but not limited to the sharing economy, lifehacking, fitness & sports tech and the evolving culture of the Bay Area. In past incarnations I've worked at AOL, Conde Nast Portfolio, Radar and WWD. Circle me on Google+, follow me on Twitter or send me tips or ideas at jbercovici@forbes.com.

5/30/2012 @ 4:44PM63,197 views

Instagram and Product Placement: Is There A Filter For Transparency?

After a long day of writing about product placement, I like to recharge with a delicious Gatorade G Series Thirst Quencher. (Disclosure: I paid for this Gatorade myself.)

“Instagrammers are the new brand influencers,” declares Adweek, in an article about how companies like Delta and Volvo are paying users of the photo-based social platform to promote them within their follower networks.

Getting paid to attend a fashion show or a yacht race, mingle with VIPs and post pictures of it — what’s not to like about that? Well, one thing, maybe:

“Nobody wants to be deemed a sellout, but everybody has to make a living,” [one brand-sponsored Instagrammer] said.

[Another sponsoree], asked if he was concerned about misleading viewers who might not realize he is working with brands, offered a slightly different take. “I’m just sharing my experiences with my audience,” he said. “Sometimes it’s personal and sometimes it’s professional.”

It’s not just a matter of personal integrity, though. Paid endorsements and testimonials are under the jurisdiction of the Federal Trade Commission, which, in 2009, published a new set of guidelines to cover blogs and social media. The animating principle of those guidelines is transparency: If someone’s paying you to say nice things, even if the payment takes the form of freebies or a discount, and if that material relationship wouldn’t be immediately obvious to all, you have to disclose it.

Instagram, which Facebookpurchased in April for $1 billion, wasn’t around when the FTC wrote its guidelines, and it presents issues the authors couldn’t have anticipated. For instance: Instagram is mobile-only, but photos posted there can be shared across other networks like Twitter and Facebook, and they can live on the web on sites like Webstagram. But users who encounter them there can’t trace them back to their original source.

That’s crucial because if consumers can’t see who’s behind a piece of content, they can’t make inferences about whether or not it was sponsored. According to Mary Engle, head of the FTC’s Division of Advertising Practices, a professional photographer like Anthony Danielle wouldn’t be subject to the same disclosure requirements as a dentist or dog-walker who happens to have a big Instagram following — as long as those who encounter his work know that he’s a professional photographer.

“The question for us is always: What are the expectations of reasonable consumers?” says Engle.

The ways that Instagram photos filter through multiple networks present other problems. A content creator might disclose a material relationship in his original post, but those who who re-share the photo on Facebook might leave it off. “If it’s no longer being disseminated by the original person, it’s less clear what the expectations of the audience are,” says Engle. “It gets to be a pretty gray area.”

In fact, the very question of whether sponsored Instagram photos constitute endorsements is a gray area. If Samsung gives you a Galaxy Note phone, and you tweet “I love my new Galaxy Note,” that’s an endorsement, and you need to disclose the relationship (eg., by appending a “#sponsored” hashtag.) But if you take a pretty picture with it and post it to Instagram with the promotional hashtag “#benoteworthy,” that might constitute not an endorsement but mere product placement. The FTC’s guidelines don’t cover product placement, and the agency’s staff in the past has taken the position that material relationships underlying placements (eg. the ubiquitous MacBooks and iPhones on television shows) don’t require disclosure.

Update: The original version of this post listed Warby Parker in the first paragraph among companies that are paying some Instagram users for brand exposure. I’ve amended that after hearing from Warby Parker CEO Neil Blumenthal. According to Blumenthal, Warby Parker has given away four pairs of glasses and about 15 gift cards to Instagram users. While that might constitute “material consideration” in the eyes of the FTC, it’s different enough from paying substantial cash sums for promotional coverage that I felt including Warby Parker in that paragraph suggested an inaccurate parallel.

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